After another ‘interesting’ non farm payrolls report, we start the week on a quiet note as the US observes the Labour Day holiday and Canada day speaks for itself. Plenty of volatility to expect thereafter though, as it is the ECB’s turn to manage market expectations, which so far show little sign of moderating as EUR longs are keen to hold positioning into a much expected tapering signal.
After the weaker US jobs report, which we will cover (briefly) later, we saw a well timed news report that the ECB are in no rush to make a decision next week and that plans for adjusting the APP may not be ready until December. There is no questioning the fact that the governing council want to temper the EUR rally, as they observed the ‘FX overshoot’ in their last meeting minutes. Since then, the spot rate has been ramped up past 1.2000 but with limited hang time above here, and the US data induced return higher was stopped short of this psychological level before the news-wires hit. Back under 1.1900, it looks to be another reluctance pullback, and one which now depends largely on the USD, as EUR proponents can only see one way for policy to go from here and do not seem to be too concerned as to where entry levels are!
This post was published at Zero Hedge on Sep 3, 2017.